SK Hynix Jumps 5.81%, but Retail Investors Still Feel the Strain

Wild Swings Take a Toll on Investors

SK Hynix Rebounds 5.81%, but Retail Anxiety Persists

Kospi Triggers 27 Sell Sidecars, 25 Buy Sidecars

SK Hynix shares rebounded, but anxiety among retail investors has yet to subside. The Kospi has swung so sharply this year that buy and sell sidecars have been triggered 52 times, while talk that subsidiary Solidigm may pursue a U.S. listing has further shaken sentiment. With volatility reaching extremes, some market participants fear individual investors could leave the market.

According to EpicAI, an artificial intelligence-based investment information platform, SK Hynix closed at 1.294 million won on Oct. 21, up 5.81% from the previous session. The stock opened at 1.26 million won, up 3.03%, then extended gains and at one point traded at 1.329 million won, up 8.67%.

The rebound was driven by bargain buying after the previous day's plunge. Sentiment also improved on news that a Chinese company had placed more than $35 billion in orders with Nvidia but could receive only 5% to 10% of that because of supply shortages.

Investors also took encouragement from SpaceX's third-quarter results, released early on Oct. 21, which showed revenue rose 161% from a year earlier and the company returned to profit. Elon Musk, SpaceX's chief executive officer, told a conference call that demand for artificial intelligence computing far exceeds supply.

Better-than-expected earnings from U.S. AI server maker Super Micro Computer also helped lift large-cap semiconductor shares. Preliminary data from the Korea Customs Service added support, showing exports for Oct. 1-20 reached $61.6 billion, up 105% from a year earlier.

SK Hynix's advance came during a broader Kospi rebound. The benchmark closed at 5,735.66 on Oct. 21, up 182.92 points, or 3.29%, from the previous session. The index rose nearly 4.8% at one point, triggering a buy sidecar at 10:52 a.m.

The problem is that South Korea's stock market has been lurching between steep gains and sharp losses almost every day, leaving SK Hynix investors increasingly fatigued. Even after a seven-session selloff from Oct. 6 to Oct. 15 that erased a cumulative 21%, the Kospi has continued to whip around like a roller coaster. The gauge rebounded on Oct. 16 and Oct. 19, but plunged 3.7% in the previous session, giving back all of those gains.

With the latest trigger, the cumulative number of sidecar activations on the Kospi this year rose to 52. That included 27 sell sidecars and 25 buy sidecars. The tally is double the 26 recorded for all of 2008 during the global financial crisis and marks the highest annual total since 2002. The frequent activation of both buy and sell sidecars underscores how volatile the domestic market has become.

As volatility intensified, signs emerged that retail liquidity was leaving the market. Data from the Korea Financial Investment Association showed investor deposits stood at 90.2975 trillion won as of Oct. 20. The balance has fallen for six straight trading days since Oct. 12. Investor deposits are widely viewed as standby funds for stock purchases.

Uncertainty surrounding SK Hynix is also mounting. Concerns have grown that existing shareholders could be hurt after signs emerged that the company may seek a Nasdaq listing for Solidigm, its U.S. sub-subsidiary.

Financial authorities recently said they view the matter as falling under duplicate-listing rules. Still, uncertainty has not eased because it remains unclear whether domestic regulators have a legal basis to restrict an overseas listing. At the same time, a brokerage report projected SK Hynix's target price could rise as high as 4.7 million won, adding to confusion among retail investors.

One SK Hynix shareholder wrote on an online stock message board that although the shares had risen, he still did not feel relieved and worried they could plunge again the next day. "Volatility is so high these days that just holding on is stressful," the investor wrote.

Another shareholder said he had invested 70 million won sent by his in-laws after strongly persuading them, but losses had grown too large to get out. "I'm checking the stock price all day on my mobile trading system. It's really draining," the investor wrote.

An executive at a Yeouido brokerage said the repeated roller-coaster trading is pushing retail investors' psychological fatigue to the limit. When stock prices are driven more by flows and short-term sentiment than by earnings or fundamentals, investors focus on avoiding losses rather than pursuing gains and may ultimately leave the market, the executive added. If inflows from retail investors weaken, that would also reduce market liquidity and downside support, creating a vicious cycle in which volatility rises again.

Kang Kyung-joo, Hankyung.com reporter memory@hankyung.com